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Tuesday, 25 January 2011

Diversity and discrimination in and around the boardroom

The Corporate Governance Code addresses the importance of diversity in companies and research from Tomorrows Company indicates that diversity imroves corporate performance. But progress is painfully slow, with women and ethnic minorities poorly represented on quoted company boards.

Then, this weekend yet another newspaper article put this into perspective for me. It was a perspective the writer did not intend – these are often the articles that provide the deepest insights for the reader – those whose authors actually have the least insight themselves. It reported directors of consultancies complaining about having to turn down work because they could not recruit the right people into key positions. The specific detail was given that they wanted people ‘typically those with MBA’s and about 15 years’ experience’; and I thought how precise that is. The issues that arise, though, are as relevant to industry, finance and commerce as to consultancy.

The first insight this provides is how limited and narrow-minded the recruiters are. And the second insight is a realisation of who is excluded: women who have taken a career break to start a family are excluded, older people are excluded, those who have not followed a conventional career path or come from poor backgrounds are excluded. This last category is also important because it indirectly affects ethnic minorities. Since black people are under-represented at top universities it is harder, on average, for them to demonstrate their abilities as quickly as competitors in the jobs market. There is clear evidence that a better school improves the chance of attending a top university which, in turn, helps to get that first job which goes on to provide the experiences that enhance career prospects. So individuals from poorer areas find themselves first disadvantaged, then discriminated against for their education, then for their speed of progress and finally for their age.

The issues of discrimination are complex and inter-related but so many of the impediments are quite unnecessary. Why, for example, is it necessary for the professions to limit entry to graduates? This discriminates against late developers who seek qualifications through adult education and is likely to affect those who performed less well at school, who often come from poorer and from ethnic backgrounds. In the past, people from humble backgrounds could join professional firms at a junior level and work their way up, obtaining qualifications at night school or through correspondence courses. Nowadays adult education is becoming more expensive and harder to find – yet more discrimination against those who are badly served by the education system. Does a degree, say in history, mean you are a better surveyor, lawyer or accountant? An excellent degree may display qualities of thought and an ability to write well, but often it is simple discrimination based on a type of snobbery and it damages social mobility. If you can get a good grade in the professional exams there is every chance that you will be just as competent as someone who has a degree in a non-relevant subject.

Consider the number of jobs whose advertising is clearly aimed at the young. An older applicant will not be considered yet may be better suited and more competent. Does it matter that they may be less ambitious because they are closer to retirement? In fact most companies shed workers as they get more senior because there are far fewer senior vacancies than junior ones. Therefore it is quite unnecessary to seek only ‘ambitious, dynamic young accountants with ten years post qualification experience’ because someone with thirty years experience might well do that job better, will be around for ten years before retirement and will not need a redundancy package when they can progress no further up the career pyramid.

And where does this argument lead eventually? It leads to an explanation of why company boards under-represent women, older workers, ethnic minorities and those from poorer backgrounds. Of course exceptional individuals will claw their way to the top regardless of any disadvantages they may suffer – but the statistics show quite clearly that these are exceptions. And this is no argument for quotas or for positive discrimination. There is no satisfactory way to ensure perfect equality of outcomes as well as of opportunity. But the point is to ask ourselves whether those ‘people specifications’ need to be as tightly drawn as they are? If we were more adventurous and less discriminatory in recruitment at all levels we would end up with more diverse, more dynamic and more innovative boards and more successful companies.

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Corporate Governance

About Me

I am a business consultant and writer living in London. An engineer, MBA and accountant, I worked as Director of Business Development for public companies in leisure and retail, involved in business planning, strategy, acquisitions and disposals.
I moved on to co-found a bookshop chain with former colleagues, and expanded it into internet bookselling.
My own books cover corporate governance, business planning, negotiating, effective financial management and dealing with insolvency and financial distress.